Shared Appreciation Second Mortgage



Shared Appreciation Second Mortgage

Application Disclosure

DISCLOSURE AND SECOND MORTGAGE INFORMATION STATEMENT

Please Read Carefully

If you wish to obtain a Shared Appreciation Second Mortgage from Wellesley College, you should read the information below concerning the difference between this mortgage and other mortgages with which you may be familiar.

General Description of Shared Appreciation

Second Mortgage Loan

THE COLLEGE OFFERS A SHARED APPRECIATION SECOND MORTGAGE LOAN. THE INTEREST RATE WILL BE TWO PERCENT (2%) PER YEAR PAYABLE MONTHLY IN ARREARS. IT IS IMPOSSIBLE TO KNOW IN ADVANCE HOW MUCH INTEREST YOU WILL HAVE TO PAY OVER THE LIFE OF THE LOAN. INTEREST RATE AND PAYMENT CHANGES WILL BE MADE ACCORDING TO CERTAIN RULES THAT ARE EXPLAINED BELOW.

The following outline of the terms of the Shared Appreciation Second Mortgage offered by the College is intended for easy reference only. You will find other essential information in the disclosure statement, in the loan note, in the second mortgage document, and in the shared appreciation agreement.

Shared Appreciation

Second Mortgage

Maximum Loan Term 30Years

Interest Rate 2%

Minimum Down Payment 5% of purchase price

Principal Repayment Must be paid in full when first mortgage is

either refinanced through outside lender or

paid in full or property is sold.

Prepayment Fee None

Assumable or Not Assumable Not Assumable

Possibility of Increasing Loan Balance No

Shared Appreciation Second Mortgage/Loan Amount (the College),

(Loan Amount-Second Mortgage_/Loan Amount (the Borrower)

SHARED APPRECIATION SECOND MORTGAGE.DOC

How Your Shared Appreciation Second Mortgage Would Work:

a) You may have a combination of a conventional first mortgage and a Shared

Appreciation Second Mortgage, such that at least 25% or at most 66 .67% of the amount borrowed after a minimum down payment of 5% of the purchase price is financed through the second mortgage.

b) Upon sale of the property or refinancing or payoff of the first mortgage, the

College will receive its appreciation in value from the date of your

original loan, subject to the limitation set forth in paragraph (c).

c) The College's share of appreciation does not include increases in value due to

those capital improvements which, with their costs (discounted to the date of your

Note) have been approved in writing by the College. The College's share of

appreciation may not exceed 12% per annum of the original principal amount of

the second mortgage compounded over the life of the loan.

d) Shared Appreciation Second Mortgages are applicable only to property within a

ten mile radius of Wellesley.

e) The Shared Appreciation Second Mortgage does not require you to repay

principal until the first mortgage has been refinanced, paid off or the property is

sold.

f) The Shared Appreciation Mortgage Program is intended to facilitate home

ownership in close proximity to the College. Priority will be given to first home

buyers.

Eligibility

The Shared Appreciation Second Mortgage is available to tenured faculty, specified physical education faculty and senior administrative staff. However, it is restricted to the purchase of your principal residence and is not applicable to the refinancing of an existing home. Preference will be given to first home buyers and to tenured faculty selling an existing house in order to move closer to the College. All mortgages will be subject to satisfactory credit review and evaluation of inspection reports and related approvals.

SHARED APPRECIATION SECOND MORTGAGE.DOC

First Mortgage from Lender other than the College

If you obtain a first mortgage from a lender other than the College, you must provide at or prior to the closing a written statement from the lender consenting to placing a Shared Appreciation Second Mortgage to the College on the property.

Fees

The College and other persons will charge fees in connection with your Shared Appreciation Second Mortgage. You will be required to pay an Application Fee of One Thousand Dollars ($1,000.00) to the College at the time of your application, which fee shall apply to both your first mortgage to the College (if any) and your Shared Appreciation Second Mortgage. Please read carefully the Good Faith Estimate of Settlement Charges set forth hereinafter.

Prepayment Penalty

You may prepay all of your Second Mortgage Shared Appreciation Note at any time without a penalty.

Partial Prepayment

Partial prepayment of the Shared Appreciation Second Mortgage Note is only allowed once during the term of the loan.

Assumption of Shared Appreciation Mortgage

Your Shared Appreciation Mortgage and Note may not be assumed by a purchaser of your home.

Termination of Employment. Ownership and Use As Personal Residence

In the event of the termination of your employment with the College for any reason or your Note reaches its maturity date, whichever comes first, or if you become partially or totally disabled (and such partial or total disability necessitates such termination), or if you cease to be the owner of the premises or if the premises cease to be your principal residence, your Note shall, at the option of the College, immediately become due and payable after notice as provided in your Note. Termination shall not include retirement or a leave of absence taken with the approval of the College.

Right of First Offer

If the premises are located close to the College, you will be required to enter into an agreement with the College that no owner of the premises will sell or convey (which shall include a gift of the premises or a lease for a term of more than one (1) year) the premises without first offering to sell the premises to the College at Fair Market Value.

Inspection Report

As part of the loan application procedure, the College requires that you provide it with a copy of a recent home inspection report for the premises. The cost of any such report shall be your responsibility.

Refinancing

The College does not anticipate at this time that it would be willing to increase any second mortgage loan it may make to you now. As set forth above, you may prepay all of your loan at any time without a penalty or you may make one partial prepayment during the life of the loan.

Tax Implications

The College understands that some tax advisors differ on what are the federal and state income tax consequences under a shared appreciation mortgage loan used to finance the purchase of a personal residence. Under certain circumstances, the contingent interest portion of such a loan may be considered as interest for purposes of Section 163 of the Internal Revenue Code, and therefore deductible. However, the College is not in a position to advise you about such consequences or such interest deductions, but does urge you to consult with your own attorney or tax advisor for advice on this subject.

Good Faith Estimate of Settlement Charges

Listed below is the Good Faith Estimate of Settlement Charges made pursuant to the requirements of the Real Estate Settlement Procedures Act (RESPA). These figures are only estimates and the actual charges due at settlement may be different. This form does not cover all items you will be required to pay in cash at settlement, for example,

any real estate tax adjustment.

Estimated

Charge

*Settlement or Closing Fee Included in App. Fee

*Abstract or Title Search Included in App. Fee

*Document Preparation Included in App. Fee

*Notary Fees Included in App. Fee

**Title Insurance $1,867.00

*Recording Fees $210.50

*Survey N/A

*Home Inspection N/A

*Municipal Lien Certificate $25.00

Application Fee $1,000.00

* These costs will be incurred by you for services rendered by an attorney of your own choosing and you should consult with that attorney for an estimate of these charges.

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